Dismantling The Middle Class: The Hidden Cost Of Higher Education
On April 23, 2012, 1:01 PM by Amanda Richards
For decades, education was viewed as the most important step on the path out of poverty and the golden ticket to class mobility in American society. While this may still ring true for those managing on a hand-to-mouth existence, the role of education in securing the continued upward economic trajectory of the middle class is much less certain. Indeed, with rising costs of tuition and cuts in student aid, the debt burden of a college education may be enough to break the middle class.
The American middle class, historically admired for its size and diversity, owes much of its existence to the public universities that made access to higher education available to everyone regardless of socio-economic background. According to Christopher Newfield in his book Unmaking the Public University: The Forty-Year Assault on the Middle Class: “There has never been a middle class in history that was not created by public infrastructure—by facilities offering rough equity regardless of personal means. As the middle class cuts public education, it cuts the conditions of its own existence.”
Since 1980, college tuition has more than doubled. Potential students often must seek outside funding in addition to scholarships, financial aid and parental support. Students used to put themselves through college on part-time jobs, but with tuition averaging roughly $21,000 a year and rising faster than inflation, the prospect of doing it alone is not an option for most – and the alternative has some pretty significant setbacks.
With disturbing analogs to the mid-2000s mortgage crisis, the United States government with backing from the Federal Reserve provided student loans via government-sponsored enterprises like Fannie Mae and Freddie Mac to individuals regardless of income or ability to repay. And government aid does not always offset the entire cost of tuition and living expenses, which forces students to take on debt in order to complete their education.
“Student loans are among the most lucrative you can make because the borrower has no protections and the creditor is afforded extraordinary powers,” says Andrew Ross, NYU Professor and labor expert at the student debt press conference. As such, these debts cannot be discharged in bankruptcy and are guaranteed through the garnishment of wages and assets, provisions which go so far as to allow creditors to commandeer disability and social security checks. Additionally, since student loans are federally backed, the government will take over collection of the loan and repay the lender in the event of a default. In a perverse case of corporate socialism, it is ultimately the taxpayer who assumes all the risk and responsibility.
The current arrangement of student loans and financial aid put middle class families in an uncomfortable bind: they earn too little to actually cover their child’s tuition and too much to receive Pell Grants or financial aid. In calculating the latter, income is considered until the student is married or reaches 24 years of age, leaving middle class students with a difficult decision: take on debt for school or don’t attend school at all.
Meanwhile, debt waits for no one. For many alumni, debt accrued while in school is a heavy burden that many carry well into their adult lives. Graduates are strapped with the financial equivalent of a mortgage (minus the house) plus a degree that may be of little use in a struggling economy, perpetuating uncertainty and even poverty instead of financial security. Many take on the loans knowing they are paying for the opportunity to get a job that will allow them, in turn, to repay the loan. But upon graduation, there is often no decent job awaiting them, and students struggle to make monthly payments on the loans that were supposed to put them ahead in the first place.
In the last twenty years, 60% of college graduates have found themselves in positions that are considered low skill and typically require no more than a high school diploma. These jobs tend to be low on the pay scale and do not afford much opportunity for overcoming debt or paying beyond an interest-only minimum payment. According to a study released by Rutgers University in May 2011, the median starting salary of the average college graduate is $27,000 while only 53% of students who graduated between 2006 and 2010 are currently employed full time.
In addition to accrued interest and penalties, there can be other serious repercussions for defaulting on student loans. For example, health care practitioners that have failed to repay a medical education loan or follow through with a scholarship obligation may be excluded from accepting patients who receive Medicare or Medicaid. A 2008 article in Physician’s News reported that “Insurers routinely de-credential providers who are excluded from the Medicare/Medicaid Program.” So, medical professionals who are unable to offset their student loans are prevented from serving a wider client base and are unequivocally stonewalled from the advancing their careers or securing financial stability.
Student debt hinders economic opportunity for many, but this is a mere symptom of a diseased model for financing education through predatory lending practices and the deregulation that has allowed financial institutions to operate uninhibited. Banks are permitted to extract profits through every available avenue without liability or consequence while students and, subsequently, the US taxpayer are left holding the bill. Nothing short of a comprehensive student loan forgiveness plan will keep the creditors from demanding their unjust and damaging dues. Though Obama’s new “Pay As You Earn” bill, that will allow borrowers to “cap their student loan payments at 10% of discretionary income,” appears to be a step in the right direction, it feels like more of an empty gesture when weighed against the generous handouts bestowed upon the banking industry.
If access to a university education is a key element of a sustainable middle class, the student debt necessary for tuition and fees is a flawed part of a model that is failing the middle class it once helped create. Until we reevaluate the profit driven industry of student debt, higher education may be more of a millstone than the golden ticket to success that it was once hailed.